To put it simply, both useState and useEffect enhance functional components to make them do things that classes can but functional components (without hooks) cannot:

• useState allows functional components to have state, like this.state in class components.
• useEffect allows functional components to have lifecycle methods (such as componentDidMount, componentDidUpdate and componentWillUnmount) in one single API.

Refer to the examples below for further illustration:

useState

class CounterClass extends React.Component {
  constructor(props) {
    super(props);
    this.state = { count: 1 };
  }
  
  render() {
    return <div>
      <p>Count: {this.state.count}</p>
      <button onClick={() => this.setState({ 
        count: this.state.count + 1
      })}>Increase</button>
    </div>;
  }
}

function CounterFunction() {
  const [count, setCount] = React.useState(1);
  return (
    <div>
      <p>Count: {count}</p>
      <button onClick={() => 
        setCount(count + 1)}
      >Increase</button>
    </div>
  );
}

ReactDOM.render(
  <div>
    <CounterClass />
    <CounterFunction />
  </div>
, document.querySelector('#app'));

<script src="https://unpkg.com/[email protected]/umd/react.development.js"></script>
<script src="https://unpkg.com/[email protected]/umd/react-dom.development.js"></script>

<div id="app"></div>

useEffect

class LifecycleClass extends React.Component {
  componentDidMount() {
    console.log('Mounted');
  }
  
  componentWillUnmount() {
    console.log('Will unmount');
  }
  
  render() {
    return <div>Lifecycle Class</div>;
  }
}

function LifecycleFunction() {
  React.useEffect(() => {
    console.log('Mounted');
    return () => {
      console.log('Will unmount');
    };
  }, []); // Empty array means to only run once on mount.
  return (
    <div>Lifecycle Function</div>
  );
}

ReactDOM.render(
  <div>
    <LifecycleClass />
    <LifecycleFunction />
  </div>
, document.querySelector('#app'));

<script src="https://unpkg.com/[email protected]/umd/react.development.js"></script>
<script src="https://unpkg.com/[email protected]/umd/react-dom.development.js"></script>

<div id="app"></div>

Read more about useState and useEffect on the official React docs.